BSML’s Summary of Principles from:
THE BALANCED SCORECARD
By Kaplan and Norton
From the BSML Business Wisdom Series
This book was motivated by a belief that existing performance measurement approaches, primarily relying on historical financial accounting measures, were hindering organisations’ abilities to create future economic value.
It advocated using the scorecard as a “strategic management system”, and through it, helping:
- Clarify and translate vision and strategy
- Communicate and link strategic objectives and measures
- Plan, set targets and align strategic initiatives
- Enhance strategic feedback and learning
BSML’s intention in compiling this summary is to share the wisdom of these renowned researchers with our clients and prospective clients, to encourage them to read the full work, and to help them use its principles to improve management practices and business performance.
Please feel free to share this link with your colleagues and friends, who have an interest in the topic.
Nick Bentley, Managing Director, BSML
- Why a balanced scorecard?
- The 4 dimensions of the framework
- Strategy maps
- Linkages to objectives, targets and initiatives
- Lead and lag indicators
- Barriers to implementation
- Process to implement a balanced scorecard/strategy map
- Strategic review and learning process of the future
1. Why a balanced scorecard?
2.1 The 4 balanced scorecard dimensions
2.2 Strategic finance choices and some possible measures
2.3 Customer focused measures
2.4 Business process areas of opportunity and measurement
2.5 Learning and growth perspective and metrics
3. Summarisation using a strategy map
4. Linkages to objectives, targets and investment initiatives
5. The book identifies 2 types of indicator
Lead indicators (drivers of future performance)
– Forward order book
– Work in progress
– Agreed payroll increases
– Client satisfaction surveys
– Product returns/fault rates
– Year to date sales and profitability
– Progress on key new initiatives
Lag indicators (measures of outcomes achieved)
– Revenue growth
– Gross profit
– Staff productivity
– Product profitability
– Net profit for the year
– Return on shareholders funds
6. The book cites 4 main barriers to strategy implementation
7. A balanced scorecard/strategy mapping implementation process
- Clarify the organisation level vision and strategy
- Develop the organisation-level balanced scorecard
- Identify and rationalise strategic and cross-business initiatives
- Test with the Board and external stakeholders
- Internal communication and education
- Translation to business unit level, planning, resourcing and target setting – including continuous improvement, radical improvement and missing measurements
- Linking to team and personal goals, stretch targets and budgets
- Reward systems linkage
- Strategic review, feedback and learning
8. Strategic review and learning process of the future
9. After “The Balanced Scorecard” the authors wrote ...
The Strategy-Focused Organisation (2000) articulates the five key principles required for building strategy-focused organizations: 1) translate the strategy into
operational terms, 2) align the organization to the strategy, 3) make strategy everyone’s everyday job, 4) make strategy a continual process, and 5) mobilize change through strong, effective leadership.
Strategy Maps (2004) argues that the most critical aspect of strategy (implementing it in a way that ensures sustained value creation) depends on managing five key internal processes: operations, customer relationships, innovation, regulatory and social processes. The authors show how companies can use strategy maps to link those processes to desired outcomes; evaluate, measure, and improve the processes most critical to success; and target investments in human, informational, and organizational capital for superior performance.
Alignment (2006) shows how today’s companies can unlock unrealised value from enterprise synergies.
The Execution Premium (2008) confirms that, owing to execution failures, companies realize just a fraction of the financial performance promised in their
strategic plans. This book presents a systematic and proven framework for achieving the financial results promised by your strategy.
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